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Macroeconomic imbalance procedure (MIP) scoreboard indicators and their predictive strength of “multidimensional crises”

Author

Listed:
  • Krzysztof Biegun

    (Wroclaw University of Economics and Business, Poland)

  • Jacek Karwowski

    (Wroclaw University of Economics and Business, Poland)

Abstract

Research background: The evaluation of the predictive strength of MIP indicators in relation to crises is extremely important for the process of coordinating the economic policies of the EU countries. MIP is one of the pillars of the economic crisis prevention procedure. Predictive power of individual indicators has not been tested before their introduction. Purpose of the article: Evaluation of the predictive strength of fourteen MIP indicators in relation to multidimensional crises in the EU countries. Methods: We used ordered probit model to test the ability of MIP indicators to correctly predict episodes of “multidimensional crises” (as defined by the authors) in the period between 2008 and 2017 in all EU Member States. Findings & Value added: We defined “multidimensional crises”, combining several negative phenomena into one limited dependent variable. This work is also novel in its application of probit regression to test the predictive strength of MIP indicators with an ordered probit model. We identified five MIP variables which were statistically significant in predicting “multidimensional crises” for all EU countries: net international investment position, nominal unit labour cost index, house price index, private sector credit flow and general government gross debt. Other variables turned out to be less important or not effective in crises prediction.

Suggested Citation

  • Krzysztof Biegun & Jacek Karwowski, 2020. "Macroeconomic imbalance procedure (MIP) scoreboard indicators and their predictive strength of “multidimensional crises”," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 15(1), pages 11-28, March.
    • Handle: RePEc:pes:ierequ:v:15:y:2020:i:1:p:11-28
    DOI: 10.24136/eq.2020.001
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    Citations

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    Cited by:

    1. Maria Siranova & Karol Zelenak, 2023. "Every crisis does matter: Comparing the databases of financial crisis events," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 652-686, May.
    2. Ostrihoň, Filip, 2022. "Exploring macroeconomic imbalances through EU Alert Mechanism Reports," European Journal of Political Economy, Elsevier, vol. 75(C).
    3. Sara Casagrande & Bruno Dallago, 2022. "Socio-Economic and Political Challenges of EU Member Countries: Grasping the Policy Direction of the European Semester," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(3), pages 487-519, September.

    More about this item

    Keywords

    macroeconomic imbalance procedure; economic crisis; multidimensional crisis; ordered probit model;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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